23 Aug Enrolled Agent vs CPA: Which is Better?
Both the EA and the CPA are great certifications that many tax professionals want in order to advance their careers. But which one to choose? Even though the EA and the CPA will help you get promoted, earn a higher salary, and guide your career, it’s important to know the differences in order to make your decision. Let’s compare each one and see which is right for you.
The Biggest Difference Between a CPA and an EABoth the CPA and the EA are credentials that must uphold stringent ethics standards. But, the CPA is regulated on the state level and the EA is regulated on the federal level. To become a CPA, you must complete 150 undergraduate hours and pass the four-part CPA exam which is administered by the AICPA. The CPA exam consists of four-parts: Auditing and Attestation, Business Environment and Concepts, Financial Accounting and Reporting and Regulation. Taxation is covered under Regulation. CPAs are licensed at the state level which limits their scope of practice to within those jurisdictions. However, CPAs can gain reciprocity in certain situations.
Enrolled agents are licensed by the IRS and are a federally licensed tax practitioner who has unlimited rights to represent taxpayers before the IRS.If you wanted to become an EA, you would have to pass a three-part comprehensive examination (Individuals, Businesses and Representation, Practice, and Procedure) which covers all aspects of the tax code. Another option is to work at the IRS for five years in a position where you were interpret and apply the tax code on a regular basis. EA candidates have to pass a background check, which is conducted by the IRS. This will include looking into your personal tax history. Ethics are a big deal for EAs, so you need to have proof of ethical tax history. It’s important to note that in the case of representing a client before the IRS, a CPA also has the privileges that an EA has.
CPA vs EA: Time Requirement DifferencesIt takes about 8-9 years to become a CPA because of all the requirements. You have to have 150 hours of college credit (bachelor’s/master’s degrees) before you can sit for the CPA exam. Some states also require a certain number of hours worked under the direct supervision of a CPA before allowing you to take the exam. You must also pass the daunting CPA Exam that has an extremely low pass rate. To become an EA, it takes far less time. All you have to do is pass a three-part exam administered by the IRS then apply for licensure. You could be exempt from taking the exam if you have qualifying employment with the IRS.
CPA vs EA: Estimated CostsHow much will it cost you to get your CPA license? Well, there isn’t a straight answer for this one because of all the different factors. If you really want to do a deep dive and get the specific requirements check out our full CPA requirements by state. Where you go to school to get your bachelor’s degree will be one cost, as well as if you continue on to get your master’s as part of the 150 credit hour requirement. You will then need a review course that will prepare you for the difficult CPA exam. The cost for sitting for the exam depends entirely on the state in which you plan to be licensed. Typically, there is a registration fee and a separate fee for each section of the exam. The license itself will cost about $150, and in order to maintain it, you must take ongoing continuing education (CE) courses. CE requirements are determined at the state levels and are cyclical (e.g. 120 hours in 3 years.) Some lucky ones will have their employers pay the cost of CPE or licensure. The process for EA candidates is much simpler. They first must obtain a PTIN (Personal Tax Identification Number) from the IRS, which costs $50. The cost of each section of the exam is $111.94. After you’ve passed the exam, there is a $30 enrollment fee. That brings the total cost to $415.82. Just like CPAs, enrolled agents must also take CE courses and the IRA requirement is 72 hours every 3 years.
CPA vs EA: Career Path DifferencesAs an enrolled agent, you will specialize in tax issues. This includes preparation of taxes for individuals and business entities as well as advising clients. You will find job opportunities at tax preparation franchises or working for a CPA. CPAs on the other hand have many more job opportunities. You could work for the government, in the private-sector, or for individuals. CPAs have gone on to become CFOs, controllers, tax specialists or auditors. They can work for the government, large and small companies/corporations, in not-for-profits or be self-employed.
CPA vs EA: Salary DifferencesOn average, CPAs earn more than EAs. But salary varies depending on where you are on the career continuum. Generally speaking though, if you are a CPA, your income will quickly outpace that of an EA. The income potential for EAs tends to flatten out over time with peak earnings to be around $60,000. CPAs, on the other hand, have many opportunities to make money. If you are a partner in a CPA firm or a CFO for a conglomerate, you could easily take home six figures The median salary for a CPA is $62,123 versus $49,000 for an EA.
Which is Better?The answer to this question really depends on what you want with your career, so I challenge you with another question: why not have both for the price of one? If you are a CPA, then there is no need to become an EA because a CPA is qualified to perform the duties of the EA. A case where this might make sense is if you work as an EA while you are preparing to sit for your CPA exam with the goal to continue work in taxation. Otherwise, it would be redundant to go for the EA when you are already a CPA. However, if you enjoy working with taxes and the challenges of keeping up with complicated regulations, then becoming an EA might be the path for you. Both the time and price associated with the EA designation are far less than those needed to become a CPA. It’s also important for you to know that market demand is greater for CPAs than EAs. But the ultimate decision comes down to what your career aspirations are. If you like accounting work with a micro focus, become an EA. If you are interested in accounting practices that have nothing to do with taxes (such as auditing), then pursue the CPA!